Bill Gates is Looking For Cash in Trash

Bill Gates’ foundation has been aggressively purchasing shares of Republic Services Inc (RSG) over the past month. The foundation spent more than $200 million on 7.5 million shares of the waste management company. This is an increase of nearly 12% in its holdings. Bill Gates has nearly $2 billion invested in RSG. He paid $26.72 per share on average since April 29. The stock currently trades at $26.28.

Republic Services is moderately popular among hedge funds. There were 24 hedge funds with bullish positions in the stock at the end of March. That number stood at 20 at the end of December. John Osterweis has more than $80 million invested in the stock, followed by Steven Richman’s $52 million position. Adage Capital, D. E. Shaw, and Kingdon Capital are the other hedge funds with $10+ million positions in the stock. Billionaire Ray Dalio sold out his $10 million position in RSG during the first quarter.

Bill Gates has been a consistent buyer of the stock whereas the rest of the insiders of the company have been executing their stock options and selling the stock in the open market. We don’t think Bill Gates’ transactions are motivated by inside information. However he has been stepping in to buy these shares whenever the stock plunges. He thinks $27 per share is an attractive price to buy RSG. He spent $103 million last August and $110 million last December when the stock was trading around $27. On April 27 RSG plunged 13% after the company announced a 9.7% decline in profit. The company also lowered its guidance to $1.86-$1.90 range.

This is not a stock that will make an investor rich. This is a stock that will keep them rich. At $26 per share the stock is trading at less than 14 times its 2012 guidance. The earnings yield is more than 7% and the stock has a dividend yield of 3.35%. Honestly we prefer RSG to 10-year Treasury bonds that yield almost 1.5%. RSG is a long-term conservative stock pick that will return cash to shareholders at a higher rate than Treasury bonds.